The Vast But Delicate China-Germany Alliance

Chinese and German leaders met last week to further extend economic ties. Yet in the shadow of Hong Kong, issues like espionage, democracy and competition make for a fragile relationship.

The Chinese Premier Li Keqiang presents a burr puzzle to German Chancellor Angela Merkel on October 10, 2014.
The Chinese Premier Li Keqiang presents a burr puzzle to German Chancellor Angela Merkel on October 10, 2014.
Stefan Braun

BERLIN — German Chancellor Angela Merkel"s podcasts have so far had very limited impact, although she continues to address the public regularly via the Internet. And just about as regularly, there is very little reaction.

So it's very interesting that just a few days before last week's consultations between the Chinese and German governments, Merkel chose that medium to comment on the Hong Kong democracy protests, saying she was happy that "the protests have been peaceful so far" and adding that she hoped "the police would also react judiciously."

The remarks were harmless, and it's unlikely that the demonstrators in Hong Kong or China's critics in Germany took much notice. But shortly before Friday's meetings began, rumors were flying around Beijing that the German ambassador had been called in for a talk as a result of Merkel's comments.

As it turns out, the rumor was just that, a rumor. But the anxiety that inevitably emerges on the subject of Beijing's human rights policies demonstrates just how wobbly the supposedly stable strategic partnership is between the two countries. And for that reason these government consultations are also going to be a balancing act.

Although links between the governments and the economies have perhaps never been as tight as they are today, the most subtle of nuances can offend. Maybe that's why Merkel mentioned Hong Kong days beforehand on the Internet. The reference and its venue were insignificant enough not to unleash open conflict. And since then no China critic can claim she left the subject unaddressed.

A unique arrangement

China doesn't conduct high-level consultations that include prime ministers with any other country. On Friday, 14 Chinese ministers met with 12 of their German counterparts to discuss more than 100 joint projects, the focal point being the so-called innovation partnership. But what's supposed to sound particularly clever harbors risks. While Beijing mainly understands innovation partnership to mean more exchange of high tech, Berlin is trying to extend the term to include the environment, climate protection, agriculture, food, but also social policies, education and democracy.

In the context of innovation partnership, the German federal government even hopes to discuss whether "a society can only really be innovative if its people can think freely,"" as a member of the Berlin government put it. Will it work? The word is that the Chinese are at least "prepared to talk."

That could of course be because Beijing, like Berlin, has to deal with worsening economic data, and the two countries need each other more than ever. Their economies have complemented each other well over the last 10 years, although the situation is slightly tenser now. A poll of German companies by the Berlin-based Mercator Foundation shows that business conditions are becoming increasingly difficult and that more companies are seeking alternatives to the Chinese market.

That is in part explained by the fact that many Chinese companies are trying to compete with the Germans in areas where the latter lead world markets. China is increasingly going "from junior partner to competitor," says Mercator's Marc Szepan.

Espionage plays a role in this too. According to German intelligence circles, there are hacker attacks from China on medium-sized German companies every week. But despite all the aggravation, it remains clear that the Chinese market is still irreplaceable for many German companies.

What should in any case be addressed are the cases of two Germans sitting in Chinese jails and facing possible death sentences. That goes too for easing visa requirements for both sides, and the difficulties faced by German policy foundations operating in China. Along with economic interests, Berlin's diplomats are also pursuing political goals, urging Beijing to pressure the Russians to stay moderate in the Middle East and Ukraine. Since Russia has been in conflict with the West over the Ukraine crisis, Russian President Vladimir Putin has become more dependent on good relations with China. Berlin sees an opportunity there to weigh on Putin via Beijing.

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Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum


SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.

It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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